1977 (9) TMI 110 - HC - Central Excise

Issues Involved:
1. Determination of assessable value for excise duty.
2. Inclusion of special packing charges, forwarding charges, and freight in the assessable value.
3. Disallowance of trade discounts.
4. Violation of principles of natural justice.
5. Maintainability of the petition under Article 226 of the Constitution.
6. Claim for refund of excise duty.

Detailed Analysis:

1. Determination of Assessable Value for Excise Duty:
The petitioner, a manufacturer of glass products, challenged the orders determining the assessable value of their products for excise duty. The assessable value was calculated by including special packing charges, forwarding charges, and freight. The petitioner argued that these charges should be excluded from the assessable value as per Section 4 of the Central Excise and Salt Act, 1944. The court referenced the Supreme Court's decision in A.K. Roy v. Voltas Ltd., which established that excise duty should only include manufacturing costs and profits, excluding post-manufacturing expenses.

2. Inclusion of Special Packing Charges, Forwarding Charges, and Freight in the Assessable Value:
The respondents included special packing charges, forwarding charges, and freight in the assessable value, arguing that these charges were necessary due to the delicate nature of the glass products. However, the court found that these charges are post-manufacturing expenses and should not be included in the assessable value. The court cited several judgments, including Atic Industries v. Assistant Collector of Central Excise and Union of India v. Mansingha Industries Pvt. Ltd., to support this view.

3. Disallowance of Trade Discounts:
The petitioner claimed deductions for trade discounts, which were disallowed by the Superintendent of Central Excise on the grounds that the discounts were not uniformly available to all independent buyers in all regions. The court held that trade discounts should be allowed as per the explanation to Section 4 of the Act. If trade discounts are given at different rates to traders in different regions, an average rate should be computed and allowed.

4. Violation of Principles of Natural Justice:
The petitioner argued that the orders determining the assessable value were passed without affording them an opportunity to be heard, violating the principles of natural justice. The court agreed, stating that the breach of natural justice could not be cured by an appellate process. The court referenced several cases, including Ridge v. Baldwin and Ponkunnam Trader v. Addl. Income Tax Officer, Kottayam, to support this view.

5. Maintainability of the Petition under Article 226 of the Constitution:
The respondents raised a preliminary objection, arguing that the petition under Article 226 was not maintainable due to the availability of an appellate remedy under Section 35 of the Central Excise and Salt Act, 1944. The court overruled this objection, stating that a violation of natural justice could not be cured by an appellate process. The court also noted that if the assessable value was determined without any authority of law, the petition under Article 226 was maintainable.

6. Claim for Refund of Excise Duty:
The petitioner sought a refund of Rs. 47,71,166.00, arguing that the excise duty was wrongly levied on selling costs and profits. The court rejected this claim, noting that the petitioner had not raised the issue of refund or submitted price lists showing the breakdown of manufacturing and selling costs at any stage. The court referenced Ogle Glass Works v. Union of India, where a similar claim for refund was denied.

Conclusion:
The court quashed the orders of assessment for the months of April 1971 to September 1973 and the demand of Rs. 46,227.92. However, the petitioner's claim for a refund of Rs. 47,71,166.00 was rejected. The court directed the Central Excise Authorities to make a fresh assessment for the specified periods after affording the petitioner an opportunity to be heard, in accordance with the law. There was no order as to costs, and the operation of the order was stayed for two weeks after the long vacation.

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